Cash vs. Mortgage
We have all heard it is a bad idea to carry debt, so it may seem as though paying for a home with cash is the smartest choice. There is a lot to consider before you decide to purchase a home outright instead of financing one.
Purchasing a Home Outright with Cash
When a buyer chooses to pay for a home outright with cash, it eliminates the need to pay interest on any loan and closing costs. There are no mortgage origination fees, appraisal fees, or other lender fees payable at the closing of your purchase.
When buyers pay in cash, it is attractive to sellers as well since they do not have to worry that their application to receive financing will be denied. A cash home purchase also closes faster than a home purchased with a loan.
A cash buyer may also have more leverage in negotiating the purchase price since the seller has more assurance that the transaction will close.
Financing the Purchase of a Home
Financing a home has significant benefits. It may not make sense to tie up a bundle of cash to purchase real estate since it may limit your options if you need the cash for major repairs or renovations or for emergencies.
There can also be tax implications when buying a home with cash. Mortgage interest payments are often tax-deductible, and a reduced tax burden is always welcome. Saving on mortgage interest by paying cash may not always make the most financial sense. Counterintuitively, a buyer may actually be worse off by paying cash than if the purchase was financed when the tax deduction is taken into consideration together with the possibility of reaping greater interest and dividends if those same funds were invested,
Making the Decision
When you are considering whether to purchase a house outright with cash or financing it, it might make sense to opt for the choice that will save or make you the most money. Or, it might make more sense to hold onto your funds and protect yourself against unforeseen circumstances. Ask yourself which choice will make the most sense for you.
Either way, make sure you will have enough cash to cover the property taxes, homeowners insurance, and homeowners association dues each month. If you do decide to take out a mortgage, be sure you can afford the monthly principal and interest payments.
Florida National Title Services
Florida National Title Services provides expert title services and researches the title to make sure the home belongs to the seller. Whether you pay cash outright or obtain financing, you need an experienced title company when you are selling a home from listing it, through inspections, and the closing. We can help every step of the way.
Florida National Title has years of experience guiding Florida homebuyers through the real estate purchase and refinance experience and have helped them solve the problems that come up in the process. We will decipher the “legalese” and explain what we need and why we need it each step of the way. The blogs to follow will address specific issues to guide buyers to understand the process better and to help them avoid many of the pitfalls. Call us at (561) 408-0729 or visit our website.
Florida National Title Services, LLC
250 S. Central Blvd., Suite 101
Jupiter, Florida 33458
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